FUDGEANALYSIS

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University of Missouri, St. Louis *

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4614

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Marketing

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Feb 20, 2024

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BAILEY’S FUDGE CASE ANALYSIS SWOT DIAGRAM & ANALYSIS STRENGTHS • High-quality homemade fudge • Upscale store atmosphere • Expertise and passion for desserts • Previous entrepreneurial ventures • Loyal local customer base • Relationships with Wal-Mart Managers WEAKNESSES • Seasonal sales • Production scalability • Digital marketing limitations • Brand exclusivity and image • Shelf space at Wal-Mart • Ruth’s age and personal life – being human OPPORTUNITIES • Holiday seasons • Other Wal-Mart regions • Online sales • Secure more shelf space in Wal-Mart • Partner with local stores for distribution • Retire, sell the shop THREATS • Other specialty food brands in Wal-Mart • Negotiations with Wal-Mart for better terms • Seasonal sales and revenue • Brand's high image if sold in mass retailers • Economic downturns • Sunk-Cost Fallacy STRENGTHS Bailey's sustained success in the early stages of its operation hinges on numerous strengths, a factor that has earned them high admiration from their consumers due to their exquisite, superior product offerings. Notably, their unique ability to produce high-quality, homemade fudge has endowed them with a unique reputation for providing premium, handcrafted fudge that has captured the hearts of their esteemed customers. Additionally, Bailey’s retail store, complete with an upmarket ambiance sets them apart from their competitors, extending a singularly unique shopping experience to their clients. Ruth's exceptional skillset in creating confectionaries, especially fudge, serves as an invaluable asset in ensuring quality maintenance, creation, and preservation of the company's competitive advantage. The proprietors' demonstrated and successful track record in previous entrepreneurial ventures is indicative of their faultless ability

BAILEY’S FUDGE CASE ANALYSIS to adapt and flourish in the business sphere. Due to their specialty in fudge offerings, Bailey's has developed a robust customer base within its confines, with an unwavering appeal. Diverse customer preferences are considered through the provision of a range of fudge flavors, including options for the diabetic clientele that are sucrose-free, thus attuning itself to the needs of its customers. Their successful relationships with a select group of Wal-Mart store managers can be leveraged to pursue expansion opportunities and further growth. WEAKNESSES Bailey's weaknesses require significant improvements to realize its ideal growth trajectory and sustain competitiveness in the industry. Its seasonality is a crucial concern that invariably impacts cash flow, resulting in subsequent critical repercussions. The highly seasonal nature of fudge sales means Bailey's encounters cash flow fluctuations, leading to inventory challenges. The exceptional demand for Bailey's fudge during holidays is, unfortunately, counterbalanced by significantly low sales during warm/summer months, making it highly unlikely for year-round production in large distribution. Effectively addressing this issue is compounded further by having only one fudge kettle, making it difficult to scale production due to Ruth's reluctance to delegate responsibilities. As such, producing adequate product quantities for both their store and Wal-Mart's shelves appears impossible. Bailey's digital advertising experience is another issue difficult to rectify due to budgetary constraints, which leads to new customers only "stumbling" upon the store instead of being aware of its existence. This poses a considerable obstacle regarding reaching a broader audience. The owners' significant concerns regarding their brand exclusivity and image built over time may also be compromised by selling in mass retailers such as Wal-Mart, with an evident difficulty in

BAILEY’S FUDGE CASE ANALYSIS securing consistent shelf space and locations in Wal-Mart during holiday seasons that significantly impact their sales. The inherent vulnerability in all of us is our humanity – simply being human – and this results in unexpected complications that are impossible to plan for. As humans, we are imbued with emotions, and when we encounter challenges in our personal and professional lives, we sometimes permit our feelings to influence our decisions and behaviors. Ruth's personal circumstances have become a weak spot for Bailey's as Ruth is approaching retirement age, and her husband's health is precarious. Unfortunately, there is minimal assistance or support, as her family members are pursuing their own ambitions and careers. OPPORTUNITIES The opportunities to advance Bailey's and promote significant growth are plentiful, with limited competition in the area presenting various possibilities. The seasonal increase in fudge sales provides ample scope for Bailey's to capitalize on the holiday demand, by establishing an e- commerce platform presenting an accessible avenue for online sales. Establishing a digital presence allows for reaching a broader audience, particularly during non-seasonal periods. Expanding Bailey's fudge distribution to other Wal-Mart regions also presents multiple opportunities for reaching new consumers, creating more sales, and establishing relationships with management beyond their current region. Extending beyond the Wal-Mart district would allow them to leverage their management relationship to secure more desirable shelf space, leading to more income and an expanded customer base. Partnering with other retailers or specialty stores, collaborating with local artisanal food producers for the cross-promotion of products and building a network with local competitors

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BAILEY’S FUDGE CASE ANALYSIS presents a significant opportunity. Finally, Ruth could choose to sell the business, which provides an alternative opportunity for her personal life outside her professional endeavors – creating opportunity costs. THREATS Bailey's faces direct competition from other specialty food brands in Wal-Mart. The competition can negatively impact sales and product usefulness, especially in relation to the shelf-life of the products. In addition, difficulty in differentiating from mass-market competitors may pose a challenge for maintaining a premium image and differentiating from mass-produced rivals. Negotiating for better terms with large retailers, such as Wal-Mart, may also be problematic due to their complex policies and the high demand for shelf space. Seasonal fluctuations in sales and revenue may lead to uneven cash flow and inventory management challenges. Moreover, selling in mass retailers may affect the brand's exclusivity, leading to a dilution of its image and name. Furthermore, economic downturns may result in decreased consumer spending on luxury food items and products that are not a fundamental necessity. Additionally, Ruth, the owner of Bailey's, may pose a threat to the business as she has been taking on a majority of the workload herself, reluctant to give up any control in the company. Delegating or outsourcing tasks to another party may be difficult for her to consider as she is invested in the brand. Ruth may be giving in to the sunk cost fallacy by struggling to relinquish control and allow others to take on some of the responsibilities. COMPETITIVE STRENGTHS & PRIMARY TARGET MARKET Bailey's competitive edge stems from its reputation for high-quality handmade fudge, its boutique store ambiance, being the only fudge manufacturer in the area, and the proprietor's culinary prowess. Ruth's culinary knowledge and passion for desserts ensure superior taste and

BAILEY’S FUDGE CASE ANALYSIS texture in the premium, artisanal fudge. Moreover, their customers can connect with the brand and its artisanal values through the unique and exclusive shopping experience offered by the retail store. Bailey's has one retail competitor in the area, but unlike Bailey's, they do not offer homemade fudge. Bailey's focuses on middle-to-upper-class women of all ages residing in various small communities within a large community extending up to 25 miles away. The women appreciate the unique in-store experience and friendly conversations along with local men who are searching for high-quality and gourmet gifts for special occasions. Bailey's should leverage word-of-mouth marketing, direct mail and collaborations with local gift shops to reach their target market. Word-of-mouth marketing through referrals by satisfied customers is a powerful tool, which Bailey's can utilize to build its customer base easily. Direct mail can also be an effective way to reach customers, as it is budget-friendly. Additionally, collaborating with local shops can offer opportunities to expand the consumer base and distribution channels for both companies. VALUE PROPOSITION: The Most Delicious Homemade Fudge You’ll Ever Taste Bailey's takes great care in crafting premium homemade fudge, ensuring that only the highest quality ingredients are used to create an artisanal product that is unrivaled in taste and texture. GOING FORWARD: YEAR-ROUND RETAIL STORE, SEASONAL WAL-MART SALES The proprietors of Bailey's are troubled by the discrepancy between their superior, high-end brand image and the discounted sales at Wal-Mart, which has resulted in a decline in sales at their retail store. They have several options available to them to address this issue: (a) exclusively sell their products at Wal-Mart to establish a reliable distribution network, potentially increasing sales, though it may compromise their luxury image and pose

BAILEY’S FUDGE CASE ANALYSIS complications associated with mass production, (b) sell their products at their retail store year- round and only sell seasonally at Wal-Mart to capitalize on their seasonal sales, (c) use dual- branding to enhance brand identity, recognition, and awareness through collaborations with other brands, though it raises some ethical concerns, (d) sell their products using Wal-Mart outside their local area and maintain Bailey's retail in the local market, which would provide a manageable way to maintain their image and focus on the local market while attempting to mass market their product elsewhere, and (e) discontinue sales through Wal-Mart and focus solely on their retail store. (a) would allow Bailey’s to establish a reliable network of distribution overtime, possibly increasing sales. This may also alienate their local consumers that enjoy Bailey’s upscale retail shop – this also creates complications associated with mass producing their products. (b) offers the ability to capitalize on Wal-Mart’s seasonal sales, while keeping their exclusivity and image intact throughout the remainder of the year. (c) provides the potential to enhance brand identity, recognition, and awareness through other brands. Bailey’s would retain their name at the retail store, but products sold at Wal-Mart would be sold under another brand name. This may potentially preserve the image of Bailey’s but raises ethical issues amongst the owners. (d) makes maintaining Bailey’s image more manageable and allow focus on the local market, and opportunity for exclusive distribution strategy in local markets, but still attempt to mass market the product in other regions. (e.) eliminates all outside distractions and complications. Not selling at Wal-Mart would allow Bailey’s to focus on their local and loyal customers – this will allow them to enhance their local success. Their product will only be able to reach so far without the assistance of larger distributions, but staying focused on their current consumer base

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BAILEY’S FUDGE CASE ANALYSIS offers opportunities to fine-tune their local reach, and to ease their way into the digital world of marketing. The most effective path forward for Bailey's is to sell their product at Wal-Mart on a seasonal basis while maintaining sales at their retail store throughout the year. This strategy preserves their exclusivity and upscale image while allowing them to take advantage of Wal-Mart's reach during peak seasons to increase volume sales. Such a strategy would also help with capacity management and address brand exclusivity concerns, enabling Bailey's to maintain its image and retain its in-store experience. Moreover, this approach strikes a balance between maintaining brand preservation and capitalizing on Wal-Mart's reach through more concentrated effort on their local markets. It also provides a strategic opportunity through peak hours at Wal-Mart stores during the holiday periods. Bailey's could expand their relationships with Wal-Mart management through successful seasonal sales, which could offer opportunities to obtain more shelf space and augment its products' visibility. SUPPLEMENTAL STRATEGIC ELEMENTS Amid numerous feasible approaches, Bailey's could significantly benefit by expanding its operations by establishing a digital footprint in the form of a company website. This strategy could lead to a larger, diverse customer base, particularly during non-seasonal periods, and in turn, bolstering sales. This would allow Bailey's to interact and engage with potential customers across the globe who might not otherwise be aware of their products. Moreover, creating a website with custom landing pages could offer a unique and personalized online experience to customers through a blog, comment section, contact and even a section such as frequently asked questions. Bailey's could very well address several obstacles, including customer reach, through this strategy.

BAILEY’S FUDGE CASE ANALYSIS One way to enlarge the distribution of Bailey's fudge is by exploring licensing agreements with neighboring gift shops or local specialty stores. Bailey's being located in a small town serving as a commercial hub to several small communities, provides an opportunity to indulge in licensing agreements with adequate local stores for increased distribution. A focus on exploring options of license agreements could open up greater accessibility for Bailey's and consequently increase brand recognition, sales, and revenue. A partnership affords an opportunity with other artisanal foods producers to cross-promote goods, raise brand awareness, and increase in-person foot traffic to Bailey's experienced-retail location. One option that has been considered by the proprietors of Bailey's is to work with their only local competitor and mutually benefit. Collaboration through such a partnership with their competitor will offer Bailey's more brand exposure and increase shelf space for more products if Ruth opts to increase production. Furthermore, since their competitor doesn't carry homemade fudge, Bailey's offering to supply could provide a benefit to the competitor by saving costs on extra fees that came with the outside manufacturer. By forging alliances, Bailey's has the potential to experience a significant return at a limited risk. LIMITATIONS TO RECOMMENDATIONS Establishing an online sales channel necessitates a robust digital marketing strategy, considerable monetary investment, and specialized expertise in running and monitoring campaigns. Successful campaigns entail high start-up costs and significant training, but cost-efficiency becomes possible when the campaigns are internally managed, rather than by third-party entities. Although the initial capital investment and time commitment are considerable, intensive training is required to learn to monitor and maintain the online store's profile. However, Bailey's lacks the necessary resources and personnel at present to invest in marketing and relevant training.

BAILEY’S FUDGE CASE ANALYSIS Maintaining quality control poses a challenge in third-party distribution, and any compromise may adversely impact the brand. Wal-Mart's sales strategy centered around the holiday season may pose staffing and capacity concerns as it tries to cope with high-demand periods. Licensing agreements bring both rewards and risks as incorrect management may dilute the brand. Competition, both in the online and offline specialty food market, jeopardizes sales growth. Although marketing, capacity, and staffing are concerning, the most pressing and severe hindrance to my recommendation is Ruth's personal life. Ruth is almost retirement age, and her husband's deteriorating health could affect her priorities, leading her to rethink her desires and drive. Ruth's personal life may impact her willingness to commit to new strategies and the amount of time she can dedicate to implementing the new strategies. Ruth may fall prey to the sunk cost fallacy, which is the tendency to persist in an endeavor even when abandoning it is the superior option. The notion that she has invested so much time, effort, energy, and love into Bailey's store may create a feeling that she must make it work and see it through. Due to the time and energy devoted, it may feel like a waste to give up. Regardless of what Ruth chooses, she will face complications as she decides how to proceed with (or without) Bailey's. Ruth will incur opportunity costs when she decides to devote all her time and energy to Bailey's; she will miss the opportunity to spend precious time with her ailing husband and with her family members. If she chooses to retire and sell the business, she will have to let go of the career that she has worked hard for and dedicated her life to. Progress at Bailey's will continue without her assistance, and with the newly acquired free time, Ruth will finally be able to care for her family and her own needs - create new memories with her husband while he can still enjoy them.

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BAILEY’S FUDGE CASE ANALYSIS CONCLUSION Bailey's is faced with the challenging task of assessing the value of its exceptional brand image together with the desire to expand by collaborating with larger retailers or distributors like Wal- Mart. The preferred choice of seasonal Wal-Mart sales with year-round retail sales enables Bailey's to concentrate on preserving its unique in-store experience and high-quality products. At the same time, they can take advantage of Wal-Mart's substantial visitor and sales potential during peak seasons. Bailey's should remain dedicated to quality and customer satisfaction in its strategic choices and day-to-day operations. Exploring online sales, collaborations, and third- party distribution can foster growth while mitigating constraints and competitive challenges. The chosen option aligns with the already mentioned priorities and serves to achieve a balance between brand preservation and growth opportunities. The brand's distinct identity and reputation for exceptional fudge should continue to be the central focus of its strategic endeavors.

FUDGEANALYSIS

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